Manufacturing AUTOMATION

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Dollar, credit and protectionism threaten ‘green’ shoots in economy: survey


November 2, 2009
By Manufacturing AUTOMATION

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Green shoots may be sprouting in the economy, but a volatile currency could delay budding a full-grown recovery, according to Canadian Manufacturers & Exporters’ (CME) October Business Conditions Survey.
 
“Manufacturers and exporters are optimistic that that the green shoots sprouting in the economy will bud into a recovery,” said CME President & CEO, Jayson Myers. “However, threats like a volatile and appreciating currency, higher commodity and energy costs, increasing protectionism in our major export market and continued difficulties accessing credit, are threatening a recovery.”
 
View the October Business Conditions Survey report.

The October numbers highlight the continued “glimmers of hope” that have appeared in previous months.

This month, 727 companies participated in the survey conducted the last three weeks of October.

It may not be an economic turnaround, but the good news is 38 per cent of respondents indicate orders have fallen over the past three months, down from 50 per cent in September. Last April, 65 per cent of manufacturers and exporters reported orders had fallen.

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Three-quarters of companies report that they expect the value of new orders to stay the same or increase in value over the next three months. This is a markedly more optimistic outlook than March’s 49 per cent of respondents who expected new orders to decrease and only 18 per cent expected to see orders increase.

Companies are also reporting lower inventories this month with 28 per cent of responding manufacturers indicate that inventory levels of components and raw materials are currently too high. This is an improvement from 31 per cent reported the last three months.

The looming challenges facing manufacturers and exporters, namely a volatile currency, is impacting the outlook for employment.  Approximately 24 per cent per cent of firms plan are expecting to trim their workforce.

“The manufacturing sector has lost more than 200,000 jobs so far this year and still, and almost one-quarter are still planning to shed jobs in the next three months."

And the credit crunch continues to be a major obstacle for manufacturers and exporters, with 66 per cent unable to secure financing for working capital purposes, operating a line of credit, capital investment purposes and investments in new technology.

This is a subtle improvement from the 70 per cent of firms that have consistently reported difficulties in accessing adequate financing every month.

“Financing constraints are one of the biggest threats to a recovery,” Myers added. “Credit is the oxygen that firms need to grow.  Without secure access to financing, forget any hope of a strong recovery anytime soon.”
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